While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of U.S. Bancorp (NYSE: USB ) slipped yesterday after Deutsche Bank downgraded the banking giant from buy, to hold.
So what: Along with the downgrade, analyst Matt O'Connor lowered his price target to $38 (from $41), pretty much exactly where the stock closed yesterday. While value investors might be attracted to the stock's recent slide -- triggered by disappointing Q3 results -- O'Connor believes that upside is limited, given the near-term headwinds working against the company.
Now what: Deutsche lowered both its 2014 and 2015 profit estimates for U.S. Bancorp below the consensus view. "3Q was disappointing in our view as we est. there was $100m+ of MSR gains that weren't disclosed," noted Deutsche. "Underlying trends were weaker than expected and the outlook seems a bit more sluggish than we had previously assumed." When you couple that sluggishness with the stock's price-to-book ratio of two -- a clear premium to close peers -- I'd agree that U.S. Bancorp's risk/reward trade-off isn't all that compelling.
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